Pay by Job or pay by hour

Hello,


We are a a relatively small job shop with around 20 employees and about 15 machinists. Machines Range from a couple conversational mills and lathes to CNC lathes and mills and a couple 5 axis mills. Most of our work is small batch 5-10 part runs with few production jobs (100-500 parts). All parts range in complexity from simple blocks with a couple holes in them to full 5 axis complicated housings. We do about a 50/50 mix of repeat jobs and new prototypes.

We are paid by the hour right now but has anyone had any luck paying employees by the job? as in getting a percentage of the quoted price of the job.

If you are getting paid by the job, would each employee need to be a private contractor? would employee be responsible for ordering and paying for tooling? Would the employee "rent machine time" from the company? Is this even possible to do with this amount of employees under one roof?

Thanks in advance for any insight!

Sounds like a good way to fuck up a shop...keep it hourly

plastikdreams said:

Sounds like a good way to fuck up a shop...keep it hourly

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Agreed, sounds like an out of the box way of trying to put more money in the owners pocket...

Will probably run afoul of the law calling them contractors.

Dave

Good luck getting employees to agree to that arrengement.

If you're trying to get an incentive plan going to motivate your employees, try a profit sharing program. Employee has X# to get job complete. If done in X# employee gets bonus .

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johneezreno said:

If you're trying to get an incentive plan going to motivate your employees, try a profit sharing program. Employee has X# to get job complete. If done in X# employee gets bonus .

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That sounds good until the scrap rate goes up because they are rushing work

You are going to run into a legal nightmare going to pay by job and are just asking for a big lawsuit.
Run this past your lawyer at the minimum. Both Fed and State rules that you need to be inside of.

Any profit sharing or rate increase based on output needs to have a big penalty and accurate checking for scrap attached.
I have such a deal but only counted scrap reported not missing.
20+ years back an ex-employee told me that if someone decides to plant corn in the field next door they will be in for big surprise when plowing as it is full of carbide.
The guys and gals on the floor will always find shortcuts to a bigger paycheck so such incentive programs need to be bullet proof.
Bob

quite a few welding shops pay by the job, each person is a contractor. You get x amount per item, if you have rework or a messed up part you don't get paid. Seems to work great for them. You can make as much as you want or as little as you want.

CarbideBob said:

The guys and gals on the floor will always find shortcuts to a bigger paycheck so such incentive programs need to be bullet proof.
Bob

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Yup seen this happen. craziest thing I I have ever witnessed.
back in the early 90s. owner decided to come up with a bonus system. looked good from the outside but was abused terrible. worthless POS in the shop were making bank. they guys who had no scrap and lower hours on the job got screwed. , then they revised it. same deal.
our jobs were big jobs meaning lots of hours just to make one operation on the part (sometimes 6 hours for one op on one part) complete job could take 1 month 3 ops for 20 parts.
Watched guys who just sat and did nothing while the machine run rack up huge hours into the job, night shift comes in and runs 1/4 the hours for more parts and got less money.

The only fair way is NO bonus system period. otherwise you will have people getting screwed and others back stabbing to get the bonus.

I am surprised at some of the responses. My brother was a diesel mechanic, before he took over the company, and was paid by the job. He did receive a base wage, which was basically minimum wage. He earned his pay by working smarter and harder than the other mechanics. Historically, most large machine shops had a base pay which was incentivized by piece work. Pay was dependant on quality/inspection. This goes back to the beginning in the late 1800's.

I always thought an incentivized machine shop would be great. If I am having a slow day where my brain isn't with it, I can make my base pay, and noone is screaming down my neck about not working hard enough. Equally, I do not feel like I am cheating the owner because I am not putting in a hard days work. Vise Versa, when my brain is firing on all cylinders, I can crank out a pile of work, and be paid in accordance with my work.

Additionally, and I think I posted this in another thread but I cannot find it now, you will burn some good workers. One of the shops I worked at, I was by far the slowest guy there. I was however, the most meticulous. I took the hard, complicated, convoluted, odd ball work everyone else left on the shelf. I scrapped less material, my tooling costs were lower, most of my jobs came out dead nuts, but I took forever. Sometimes this was the difference in machinists. When I look at a print, I examine it from the view point of, will this tooling work, are there any design issues, etc. I could sometimes catch engineering mistakes that prevented reworks. Most just made it to print.... "not their job". Does your system penalize, or reward that type of behavior?

There are so many pitfalls to piece work in a machine shop there are too many to count. What about tooling usage? The perfect cycle time is one that generates the highest net profit per hour. If I was running a job that was hard on expensive tooling if you push the SFM and I am getting paid by the part I no longer concern myself with tooling costs. The only thing I am concerned with is what produces the most parts an hour. Let us say two drills and a reamer cost $50 a set and will last a shift at a 12 minute cycle time on a deep hole drilled lathe part in 303 stainless. If I speed up all the drilling to achieve an 8 minute cycle time the drill and reamer sets only last an hour. It only takes me 5 minutes to change them. I now have increased by productivity from 40 parts to 55 parts a shift, but I just increased tooling expense $350. The parts aren't worth enough to spend $350 to get 15 more a shift.

Aejgx6 said:

That sounds good until the scrap rate goes up because they are rushing work

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You add for the bonus, and you subtract for the scrap...duh

FWIW this subject has been written about here multiple times, with both pro/con, and different schemes to accomplish what you want.

Take 15 minutes and actually search and read the forum, to not do so shows you want
everything handed to you....IE lazy.

This works ok for mechanics, where you can often beat the book rate if you're decent. I knew a guy who worked at Lincoln welders doing assembly and he said they had a piece rate system which worked pretty well. But mechanics usually have their own tools. In a factory they have whatever tools and jigs there.

As mentioned above just the potential abuse of tooling would make it really hard to do in a machine shop. It's already an issue often with guys hoarding stuff or ragging out machines. Then the fact that there's almost no way to make a "book" for rates, a-holes scarfing up gravy jobs, I don't see it working.

Well it sounds like this is not such a good idea! I have a couple mechanic buddies who get paid by the job and they are making a lot more than what they could hourly. I think there is too much variance in parts, run time, tooling, scrap and quality to come up with a flat rate that is fair to everyone. I was curious if this was a way to go about paying in this industry but looks like hourly and salary are the standard.

Thanks for the insight on this. Looks like the solution is to just keep giving regular healthy raises to guys who are busting butts and making good parts.

I think the best incentive is a shop wide percentage of profits made simple, out the door minus scrap and costs. With it paid half weekly, bi-weekly or monthly so it might be the value of a dinner out or more and the other half paid a week before Christmas.
Guys and gals start being more careful and help each other and help the shop.

I think my son is getting around $35K year end bonus as a diesel and all equipment mechanic.Likely he is making perhaps $30 per hour(?). All the guys try to do their best to keep up the high bonus.

Don't forget, any new hire will likely have a hard time making decent wage white getting up to speed.

I don't think i would work in that environment personally. Unless of course i was quoting the work.